Apple in antitrust crosshairs over e-book pricing

The Department of Justice may sue Apple and five e-book publishers for …

Left, a book from the publisher Hachette Digital, one of the publishers that may be colluding with Apple on e-book prices; right, the same book on Amazon, for the same price.

Photograph by Casey Johnston

The Department of Justice has plans to sue Apple for allegedly colluding to fix the prices of e-books, the Wall Street Journal reported Thursday.

Until fairly recently, publishers sold books to retailers for around half the suggested cover price, and then retailers were free to set their own prices. In recent years, Apple has turned its e-books business in the iBookstore over to an "agency model," where publishers decide how much the book will sell for at a given retailer, but must take into account the fact that Apple gets a 30 percent cut of each sale. On top of that, Apple stipulated that the publishers could not sell their e-books for lower prices anywhere else.

According to quotes pulled from Steve Jobs by Walter Isaacson, Jobs said that publishers then took the agency model to other e-book retailers and told the retailers they had to agree to the minimum retail price set by Apple's pricing strictures, preventing other e-book sellers like Amazon from undercutting the competition. The five publishers under scrutiny for working with Apple in this way include Simon and Schuster, Hachette Book Group, the Penguin Group, Macmillan, and HarperCollins.

The DoJ believes these actions constitute a violation of antitrust law, and are attempting to settle the case with the relevant companies. If a settlement is not reached, according to the WSJ, the DoJ will sue Apple and the five publishers.